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MENA stock tips, October 2012

Regional investment experts give tips on where to put your capital

by Maya Sioufi

Bailout news dominated market headlines last month, but this time it was the European Central Bank (ECB) that committed unlimited funds to acquire the short-term debt of European countries in distress. Across the pond, the United States debt topped $16 trillion and the Federal Reserve announced a much anticipated third round of quantitative easing. For investment tips this month, Executive sat with Georges Abboud, head of private banking at Lebanon’s Blom Bank, and Mohammad Ali Yasin, the head of brokerage at National Bank of Abu Dhabi.

Georges Abboud

Bullish or bearish? With a lack of visibility in the markets, Abboud remains cautious and is keeping an eye out for high yielding fixed-income securities. “Investors are afraid of the valuation of equities,” says Abboud. He still recommends exposure to large-cap companies with solid growth in the pharmaceutical, energy and technology sectors but he would buy them on weakness and would sell them once they generate a 7 to 8 percent return.

Can Europe stick together? “It can’t afford not to,” says Abboud. He believes it is not in the interest of Germany to see Europe break up, as the majority of their exports are sold in Europe and they don’t want to see the Deutschmark, their former currency, resurrect with an explosion in value. As for Greece, while Abboud believes it might be better off if it left the Eurozone, its exit will send a very bad signal and cause a domino effect on other European countries. He doesn’t expect the euro to crash but is happy to sell the euro/dollar in the high twenties.

Favorite regions? US markets are now expensive, according to Abboud, and he would stock pick names in the technology sector such as Google, LinkedIn and Apple, which he would buy on dips. As for the European markets, despite their troubles, Abboud would add exposure to solid names such as AstraZeneca, which offers a 7 percent dividend yield. On emerging markets, he favors Russia as it is cheap and Abboud would gain exposure by acquiring energy company Gazprom, despite political risk.

Thoughts on MENA markets? Abboud sticks to his October 2011 recommendation of having some exposure to the stock market in Saudi Arabia and would diversify across sectors. As for Egypt, last October he was very positive about buying Orascom Telecom, he has since exited the stock after generating a significant return and wouldn’t be investing in this country for now due to political issues. In Lebanon, he likes Solidere, which he says is cheap, and could go to $17 within a short time on positive news. He is also bullish on Lebanese government bonds, now generating returns of 5 percent up from 3 to 4 percent in May.

Top investment ideas? While nothing “would make [him] jump on his desk” with joy, he does seem pretty keen on investing in US residential real estate. He is currently working on a partnership with a private equity firm in the US in order to provide his clients with a vehicle allowing them to gain exposure to the US residential market.

Mohammad Ali Yasin

Thoughts on the markets? “Avoid Europe” seems to be one of Yasin’s key recommendations as he sees a lot of value in US markets. As for Asia, with China and India’s economies slowing down, he is not keen on this region. Closer to home, he likes markets in the United Arab Emirates, Saudi Arabia, Egypt and Qatar.

Would an exit of Greece from the Eurozone come as a surprise? Yasin believes the Greek exit is priced in and if the actions of European Central Bank President Mario Draghi, in the upcoming weeks, help keep Greece in the Eurozone, he expects a rally in European markets. He believes some investors are positioning themselves for this by acquiring Spanish and Italian bonds. “If you are a gambler, you can take a position one way or another but if you are not a gambler then you stay out.”

Favorite asset classes to invest in? Yasin would place 60 percent of his portfolio in US, Saudi Arabia and UAE equities. He would place another 20 to 25 percent in corporate bonds and government-related bonds mainly in the Gulf Cooperation Council. The rest he would put in soft commodities or gold.

Top regions to invest in? He favors US equities within the developed markets. For the MENA region, he favors the GCC markets and his top pick is Saudi Arabia, followed by the UAE.

Top ideas? His top two ideas are deploying capital in the US technology sector, which he says “is the sector to be in if [US President] Obama is reelected, as whenever there is a democratic president, the technology and pharmaceutical sectors benefit.” He would also invest in the UAE equity markets with a preference for the banking sector.

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Maya Sioufi

Maya is a research consultant on Arab youth entrepreneurship and employment. She headed Executive's banking, finance and entrepreneurship sections from 2011 to 2013. Previously, she worked at JP Morgan in London in equity sales for three years. She holds an MSc in Accounting and Finance from the London School of Economics (LSE) and a BA in Economics from the American University of Beirut (AUB).   

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